Partial win for self-managed super

A self-managed super fund will have to cough up tax at the highest marginal rate of 47 per cent on $2.5 million of income, after losing its appeal in the full Federal Court. But in a partial triumph, the fund won its battle to have a 25 per cent penalty wiped out.

Allen’s Asphalt Staff Superannuation Fund received $2.5 million in pretax income from a related trust. It sought the concessional super fund tax rate of 15 per cent, but the Tax Office accused it of anti-avoidance, slogging it with an additional $677,000 in tax at the highest rate and a $169,000 penalty.

Chief Justice
Patrick Keane
and judges Andrew Greenwood and
John Middleton
in the full Federal Court in Brisbane held that the payment was “special income" as the parties were related and not dealing on commercial terms, meaning the 47 per cent rate was correctly applied.

But the court held the taxpayer’s position was arguable, albeit wrong; as such, no penalty was due. It said laws had been changed to clarify the area.

In a lightly veiled swipe at the Tax Office, it said the regulator’s “insistence that the outcome of the present case was clear beyond rational argument" had “a somewhat pharisaical quality". According to the Oxford dictionary, pharisaical is derived from Pharisee: “a self-righteous or hypocritical person".